The simplified limited liability company (Société à responsabilité limitée simplifiée – SARL-S) is a form of commercial company that is subject to rules that are somewhat different to those that apply to a conventional private limited liability company (Société à responsabilité limitée – SARL).

One of the main features of the SARL-S is that, for entrepreneurs, it reduces the burden of some of the requirements for forming an SARL. For example, the minimum share capital required to form an SARL-S is EUR 1, and the company can be formed by private deed, without the need for a notary.

The SARL-S provides first-time entrepreneurs with a vehicle that allows them to commence trading immediately.

Who is concerned

SARL-Ss can only be formed by natural persons.

A natural person may not be a shareholder in more than one SARL-S at the same time, unless shares were transferred to them following the death of another shareholder.

On the other hand, a natural person may be a shareholder in an SARL-S and another company having a different legal form. For example, they may be a shareholder in an SARL-S and a conventional SARL, or an SA (public limited company), at the same time.

As is the case for conventional SARLs, an SARL-S can have between 1 and 100 shareholders.

Prerequisites

Simplified limited liability companies can only be formed by craftsmen, traders, manufacturers and certain liberal professionals, and the purpose of the company must be specified in its deed of incorporation.

Anyone who wishes to form an SARL-S must first apply for a business permit from the Ministry of the Economy. The permit will be required to register the company with the Trade and Companies Register (Registre de commerce et des sociétés – RCS).

Costs

Setting up an SARL-S entails certain costs, including:

• the cost of publication in the Trade and Companies Register (RCS);
• a share capital contribution of at least EUR 1;
• any costs related to the issuance of administrative authorisations.

How to proceed

Deed of incorporation

An SARL-S may be formed by private deed. A notarised document is not required.            

Company name

The SARL-S must have a company name that is established in its deed of incorporation.

The name must be different from that of any other existing company.

To find out whether the company name is available, contact the RCS.

The company name, followed by the wording "SARL-S", must appear on all legal company documents.

Duration

An SARL-S may be established for a limited duration or an unlimited duration.

Conversion

If the number of shareholders exceeds 100, the SARL-S has one year to change its legal form.

It will also be required to change its legal form if the share capital exceeds EUR 12,000.

The decision to change the legal form of the company is taken at a meeting of shareholders.

Dissolution

An SARL-S may be dissolved for the following reasons:

• expiry of the company's duration;
• completion or extinction of its business purpose;
• judicial ruling to dissolve the company for legitimate reasons;
• voluntary dissolution decided on by the single shareholder or all shareholders at the meeting of shareholders.

Any document establishing the voluntary dissolution of the company must be accompanied by the following administrative certificates:

• a certificate issued by the Data-Processing, Membership and Contributions Centre of the Joint Social Security Centre (Centre commun de la sécurité sociale – CCSS);
• a certificate issued by the Luxembourg Inland Revenue (Administration des contributions directes);
• a certificate issued by the Registration Duties, Estates and VAT Authority (Administration de l’enregistrement, des domaines et de la TVA).

Capital

The share capital of an SARL-S must be at least EUR 1 and no more than EUR 12,000. It must be fully subscribed and paid up when the company is formed.

The contributions of the company's shareholders must be in cash or in kind.

Form of company shares

The shares in an SARL-S are registered shares.

Neither shares in the company's capital nor profit shares may be issued to the public.

Shares in the company's capital and profit shares may not be negotiable securities; they may only be registered share certificates – i.e. issued to registered shareholders.

Private bond issues are allowed, but the shareholders' approval is required in the case of convertible bonds.

Transfer of company shares

The company shares are not freely negotiable.

Shares with voting rights may not be transferred inter vivos to anyone other than shareholders or holders of profit shares with voting rights without the approval of the general meeting of shareholders representing at least 75 % of the share capital. However, if provided for in the articles of association, the proportion of the share capital required for approval may be lower (but not less than 50 %).

Share transfers must be recorded in a private deed or a notarised deed.

Structure of managerial bodies

An SARL-S is managed by one or more managers – who may or may not be shareholders – appointed by the shareholders, either in the articles of association or in a subsequent deed, for a limited or unlimited term. The shareholders' assembly represents the company's capital and takes all decisions regarding the latter.

The manager

The management of the company is entrusted to one or more natural persons – who may or may not be shareholders – appointed by the shareholders, either in the articles of association or at a subsequent general meeting of shareholders, for a limited or unlimited term.

With the exception of actions requiring a decision on the part of the shareholders, as provided for by law or in the articles of association, the manager(s) may undertake any action they deem necessary or useful for achieving the corporate purpose.

The day-to-day management of the company, as well the representation of the company in managerial matters, can be delegated to one or more managers, directors or other representatives – who may or may not be shareholders – acting alone or jointly.

The company is bound by the actions of the managers, even if these actions surpass the company purpose.

Meeting of shareholders

The shareholders' decisions are taken at general meetings of shareholders. The general meeting of shareholders decides on the following:

• amendments to the articles of association;
• changes in the company name;
  
• changes in the share capital;
• changes in the legal form of the company;
• the appointment or dismissal of managers;
• the liquidation of the company, or changes in its nationality.

The shareholders are entitled to a share of the profits.

The shareholders are entitled to information on the inventory, balance sheets and reports produced by the supervisory board, if such a board exists.

Management reports produced by the SARL-S must be approved by the shareholders at a meeting of shareholders.

In SARLs with more than 60 shareholders a general meeting of shareholders must be held at least once a year. The time of year at which the meeting is held is specified in the company's articles of association.

Other meetings of shareholders are convened by the manager(s).

Unless the articles of association have been amended to state otherwise, it is not mandatory to hold a general meeting in SARL-Ss with fewer than 60 partners. In this case, the partners are invited to send in their votes in writing, after having received the text of the resolutions or decisions to be taken.

Shareholders may enter into agreements amongst themselves regarding the exercise of voting rights.

Each shareholder has a number of votes equal to the number of shares they hold. Decisions are validly taken by majority vote representing 50 % of the capital.

Liability

The founders of the company and, in the event of an increase in capital, the managers, are jointly liable in respect of third parties for:

• any part of the capital that is not validly subscribed, and for the difference between the minimum capital and the subscribed capital;
• the full payment of the shares and the portion of the capital for which they have subscribed;
• remedying any damages arising from:
  •  the company's nullity; or
  • omissions or inaccurate statements in the company's deed of incorporation.

However, the deed of incorporation of the SARL-S may restrict the label of "founder" to subscribers who, together, hold at least one third of the share capital. In that case, all other shareholders mentioned in the deed of incorporation will be deemed simple subscribers.

The shareholders are liable to the extent of the amount of their contribution to the share capital.

The company is bound by the actions undertaken by the manager(s), even when they surpass the corporate purpose, unless it can be proven that the third party involved knew, or could not have been unaware of, the fact that the action surpassed the corporate purpose.

However, when several managers are appointed, the company may define their joint and/or individual duties and powers, in which case the latter must be declared to the Electronic Compendium of Companies and Associations (Recueil électronique des sociétés et associations – RESA) for publication and then become enforceable against third parties.

Managers are accountable to the company for carrying out the duties entrusted to them, and for any misdeeds committed in the performance of such duties.

Obligations

Auditor oversight

SARL-Ss with more than 60 shareholders are subject to compulsory oversight by one or more internal auditors named in the articles of association. The auditors may or may not be shareholders.

Any company which, on the balance sheet closing date after 2 consecutive years of operation, exceeds the thresholds specified in 2 of the 3 criteria mentioned below, is legally required to have their accounts audited by a statutory auditor:

• balance sheet total: EUR 4.4 million;
• net turnover: EUR 8.8 million;
• average number of full-time employees: 50.

Legal publications

An SARL-S must apply for registration with the RCS.

The formality of registering the company with the RCS requires the disclosure of the following information about the company:

• the company or trade name and, where applicable, any abbreviations or commercial sign used;
• the legal form of the company and, where applicable, any additional details required by law;
• the exact address of the company's head office;
• the purpose of the company;
• the amount of the share capital.

Additionally, the SARL-S must disclose:

• the identities of its shareholders, their private or professional addresses and the number of shares they hold;
• its business permit number.

All subsequent changes must be filed with the RCS for publication in the RESA.

All of the company's legal documents must bear:

• the company name;
• the wording, "société à responsabilité limitée simplifiée";
• the address of its head office;
• the Luxembourg Trade and Companies Register registration number;
• the capacity of the signatory of the legal document.

The company's financial statements must be filed with the Luxembourg Register of Trade and Companies (RCS) within 7 months of the closing of the financial year (6 months to hold the general meeting of shareholders, plus 1 month from the date of the meeting).

Accounting

An SARL-S must produce:

• a balance sheet;
• a profit and loss statement, along with its annexes;
  
• a management report, which must be approved by the general meeting of shareholders.

An SARL-S may produce a short-form balance sheet if, on the balance sheet closing date, it has not exceeded the thresholds in 2 of the following 3 criteria:

• balance sheet total: EUR 4.4 million;
• net turnover: EUR 8.8 million;
• average number of full-time employees: 50.

An SARL-S may group certain items together in the profit and loss statement if, on the balance sheet closing date, it has not exceeded the thresholds in 2 of the following 3 criteria:

• balance sheet total: EUR 20 million;
• net turnover: EUR 40 million;
• average number of full-time employees: 250.

Taxation

SARL-Ss are subject to the following fees and taxes:

• a fixed registration fee;
• property tax;
• business tax;
• net wealth tax;
• corporate income tax;
• VAT, based on the following criteria:
  • if its annual turnover excluding taxes is less than EUR 112,000: VAT returns must be filed annually;
  • if its annual turnover excluding taxes is between EUR 112,000 and EUR 620,000: VAT returns must be filed quarterly;
  • if its annual turnover excluding taxes exceeds EUR 620,000: VAT returns must be filed monthly.

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